Q Update. May 3, 2017

Transcription

1 Q Update May 3, 2017

2 Safe Harbor Statement This webcast presentation contains a number of forward-looking statements. Words such as build, gain, drive, invest, grow, execute, enable, continue, expect, opportunity, deliver, strengthen, leverage, ramp up, will, and variations of such words and similar expressions are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding Kraft Heinz s plans, integration, savings, investments, execution, growth, leverage, innovation, credit rating, brands and efficiencies. These forward-looking statements are not guarantees of future performance and are subject to a number of risks and uncertainties, many of which are difficult to predict and beyond Kraft Heinz s control. Important factors that affect Kraft Heinz s business and operations and that may cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, increased competition; Kraft Heinz s ability to maintain, extend and expand its reputation and brand image; Kraft Heinz s ability to differentiate its products from other brands; the consolidation of retail customers; Kraft Heinz s ability to predict, identify and interpret changes in consumer preferences and demand; Kraft Heinz s ability to drive revenue growth in its key product categories, increase its market share, or add products; an impairment of the carrying value of goodwill or other indefinite-lived intangible assets; volatility in commodity, energy and other input costs; changes in Kraft Heinz s management team or other key personnel; Kraft Heinz s inability to realize the anticipated benefits from its cost savings initiatives; changes in relationships with significant customers and suppliers; execution of Kraft Heinz s international expansion strategy; changes in laws and regulations; legal claims or other regulatory enforcement actions; product recalls or product liability claims; unanticipated business disruptions; failure to successfully integrate the business and operations of Kraft Heinz in the expected time frame; Kraft Heinz s ability to complete or realize the benefits from potential and completed acquisitions, alliances, divestitures or joint ventures; economic and political conditions in the nations in which Kraft Heinz operates; the volatility of capital markets; increased pension, labor and people-related expenses; volatility in the market value of all or a portion of the derivatives Kraft Heinz uses; exchange rate fluctuations; disruptions in information technology networks and systems; Kraft Heinz s inability to protect intellectual property rights; impacts of natural events in the locations in which Kraft Heinz or its customers, suppliers or regulators operate; Kraft Heinz s indebtedness and ability to pay such indebtedness; tax law changes or interpretations; and other factors. For additional information on these and other factors that could affect Kraft Heinz s forward-looking statements, see Kraft Heinz s risk factors, as they may be amended from time to time, set forth in its filings with the Securities and Exchange Commission, including our most recently filed Annual Report on Form 10-K. Kraft Heinz disclaims and does not undertake any obligation to update or revise any forward-looking statement in this presentation, except as required by applicable law or regulation. Non-GAAP Measures This webcast presentation also includes non-gaap financial measures, including Organic Net Sales, Adjusted EBITDA and Adjusted EPS. These non-gaap financial measures should not be considered replacements for, and should be read together with, the most comparable GAAP financial measures. A reconciliation of these non-gaap financial measures to the most directly comparable GAAP financial measures can be found in the Appendix to this presentation. The Kraft Heinz Company All rights reserved 1

3 Q1 Update U.S. consumption softer than expected Executed go-to-market agreements with key retailers in Canada later than usual Generating solid returns from investments in growth initiatives Combination of Year 2 and new-to-the-world Big Bets Key growth driver in Europe and Rest of World 2017 innovation pipeline on track Delivering cost savings consistent with expectations Achieved cumulative Integration Program savings of ~$1.3 billion Strengthened our vision for Growing a Better World Set new goals for sustainable sourcing, animal welfare, fighting hunger The Kraft Heinz Company All rights reserved 2

4 Q1 Financial Summary (2.7%) Organic (1) $6,570 $6,364 Price: 1.0% Vol/mix: (3.7%) Pricing gains in ROW and U.S. partially offset by promotional timing, primarily in Canada and Europe Vol/mix decline in North America more than offset gains in ROW and Europe (2.4%) constant currency $1,951 $1,885 Impact of net sales decline in North American and business investments in ROW more than offset benefit of ongoing cost savings in North America and Europe Adjusted Adjusted EPS (1) EBITDA (1) Net Sales ($mm) ($mm) +15.1% $0.73 $0.84 Strong EPS gains driven by Preferred refinancing Adjusted Q tax rate of ~29% in line with prior year, slightly below ~30% effective rate expected on an ongoing basis (1) Non-GAAP financial measure, see GAAP to Non-GAAP reconciliations at the end of this presentation. The Kraft Heinz Company All rights reserved 3

5 U.S. Update Several headwinds versus prior year Calendar shifts, tax return delay drove > 50% measured-channel category and market share declines Select distribution losses in club also impacted measured-channel performance Non-measured channels and other traderelated impacts essentially neutral (3.6%) Measured-Channel Consumption Big Bets driving consumption gains, more to come Devour & SMART MADE frozen entrees, Lunchables, mac & cheese portfolio Launching Philly Cheesecake Cups, Capri Sun Sport, Cracker Barrel Oven Baked and renovation of Oscar Mayer hot dogs Q2 to see better leveraging of Kraft Heinz scale at retail Increased in-store activity, better execution The Kraft Heinz Company All rights reserved 4

6 Segment Adjusted Net Sales ($mm) EBITDA($mm) United States: Q1 Results (3.5%) Organic (1) $4,715 $4,552 Price: 0.7% Vol/mix: (4.2%) Favorable pricing primarily driven by cheese Vol/mix driven by consumption declines, including calendar shifts, and select distribution losses in club channel Foodservice, cheese, meats and nuts most affected Offset strong, ongoing gains in Lunchables, frozen meals and macaroni & cheese (1.4%) $1,493 $1,472 Incremental Integration-related savings and gains from pricing were more than offset by vol/mix decline and unfavorable key commodity (2) costs, particularly coffee and meats Prior year included significant key commodity favorability (1) Non-GAAP financial measure, see GAAP to Non-GAAP reconciliations at the end of this presentation. (2) The Company's key commodities in the United States and Canada are dairy, meat, coffee and nuts. The Kraft Heinz Company All rights reserved 5

7 Segment Adjusted Net Sales ($mm) EBITDA($mm) Canada: Q1 Results (14.9%) Organic (1) Lower pricing driven by changes in promotional spending levels versus the prior year $504 $443 Vol/mix decline from combination of reduced in-store activity and agreed discontinuation of certain lower-margin products at retail Price: (1.0%) Vol/mix: (13.9%) Cheese and coffee categories most affected (18.8%) constant currency $151 $126 Impact of lower net sales more than offset additional Integration savings Strong input cost favorability a significant contributor to prior year results (1) Non-GAAP financial measure, see GAAP to Non-GAAP reconciliations at the end of this presentation. The Kraft Heinz Company All rights reserved 6

8 Segment Adjusted Net Sales ($mm) EBITDA($mm) Europe: Q1 Results (0.2%) Organic (1) $583 $543 Price: (0.6%) Vol/mix: 0.4% Strong currency headwinds persist Pricing decline driven by timing of promotional activity, primarily in UK and Italy Vol/mix growth driven by UK condiments and sauces, partially offset by weakness in Italy infant nutrition and Netherlands soups and beverages +4.6% constant currency $180 $170 Constant currency gains from manufacturing savings, partially offset by higher input costs in local currency (1) Non-GAAP financial measure, see GAAP to Non-GAAP reconciliations at the end of this presentation. The Kraft Heinz Company All rights reserved 7

9 Segment Adjusted Net Sales ($mm) EBITDA($mm) Rest of World: Q1 Results +8.1% Organic (1) $768 $826 Price: 5.1% Vol/mix: 3.0% Pricing primarily driven by price increases to offset higher local-currency input costs in Latin America Vol/mix gains driven by ongoing growth in China as well as condiments and sauces growth in Latin America Favorable holiday-related shipment timing in Indonesia offset by distributor network realignment in several markets (9.1%) constant currency $166 $146 Strong vol/mix gains more than offset by investments in marketing and sales to drive growth initiatives as well as higher input costs in local currency (1) Non-GAAP financial measure, see GAAP to Non-GAAP reconciliations at the end of this presentation. The Kraft Heinz Company All rights reserved 8

10 Outlook Profitable organic sales growth to ramp up as year progresses Stronger calendar at retail in U.S., particularly H2 Restoration of normal go-to-market activity in Canada Continuation of positive, investment-driven trends in Europe, ROW Still expecting 2017 results driven by aggressive up-front investments in growth, followed by significant H2 savings On track to deliver $1.7bn cumulative Integration Program savings, net of inflation and business investments in North America, by end of 2017 Significant work ahead Footprint-related manufacturing startups well underway Strong agenda of Big Bet launches, marketing initiatives, investments in go-to-market capabilities still to come The Kraft Heinz Company All rights reserved 9

11 The Kraft Heinz Company All rights reserved 10

12 Appendix The Kraft Heinz Company All rights reserved 11

13 Appendix The Kraft Heinz Company All rights reserved 12

14 Appendix The Kraft Heinz Company All rights reserved 13

15 Appendix The Kraft Heinz Company All rights reserved 14

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17 Appendix The Kraft Heinz Company All rights reserved 16